Question 1

Under the Bretton Woods system

Accepted Answer

A) each country established a par value for its currency in relation to the dollar. 
B) the U.S.dollar was pegged to gold at $35 per ounce. 
C) each country was responsible for maintaining its exchange rate within 1 percent of the adopted par value by buying or selling foreign exchanges as necessary. 
D) all of the above 
A) each country established a par value for its currency in relation to the dollar. 
B) the U.S.dollar was pegged to gold at $35 per ounce. 
C) each country was responsible for maintaining its exchange rate within 1 percent of the adopted par value by buying or selling foreign exchanges as necessary. 
D) all of the above D

Question 2

Suppose that both gold and silver are used as international means of payment and the exchange rates among currencies are determined by either their gold or silver contents.Suppose that the dollar was pegged to gold at $20 per ounce,the Japanese yen is pegged to gold at 120,000 yen per ounce and to silver at 8,000 yen per ounce of silver,and the Australian dollar is pegged to silver at $5 per ounce of silver.What would the exchange rate between the U.S.dollar and Australian dollar be under this system?

Accepted Answer

A) $1 U.S.= $1 Australian 
B) $1 U.S.= $2 Australian 
C) $1 U.S.= $3 Australian 
D) None of the above 
A) $1 U.S.= $1 Australian 
B) $1 U.S.= $2 Australian 
C) $1 U.S.= $3 Australian 
D) None of the above C

Question 3

Once the changeover to the euro was completed by July 1,2002,the legal-tender status of national currencies in the euro zone

Accepted Answer

A) was canceled, leaving the euro as the sole legal tender in the euro zone countries. 
B) was affirmed at the fixed exchange rate. 
C) was tied to gold. 
D) none of the above 
A) was canceled, leaving the euro as the sole legal tender in the euro zone countries. 
B) was affirmed at the fixed exchange rate. 
C) was tied to gold. 
D) none of the above A

Question 4

Assume that a country is on the gold standard.In order to support unrestricted convertibility into gold,banknotes need to be backed by a gold reserve of some minimum stated ratio.In addition,

Accepted Answer

A) the domestic money stock should rise and fall as gold flows in and out of the country. 
B) the central bank can control the money supply by buying or selling the foreign currencies. 
C) Both a) and b) 
A) the domestic money stock should rise and fall as gold flows in and out of the country. 
B) the central bank can control the money supply by buying or selling the foreign currencies. 
C) Both a) and b)

Question 5

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Accepted Answer

A) At an exchange rate of $1.80 = £1.00, demand for British pounds exceeds supply. 
B) At an exchange rate of $1.80 = £1.00, supply for British pounds exceeds demand. 
C) Under a flexible exchange rate regime, the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00. 
D) a) and c) are correct 
A) At an exchange rate of $1.80 = £1.00, demand for British pounds exceeds supply. 
B) At an exchange rate of $1.80 = £1.00, supply for British pounds exceeds demand. 
C) Under a flexible exchange rate regime, the U.S.dollar will depreciate to an exchange rate of $1.90 = £1.00. 
D) a) and c) are correct

Question 6

Prior to the peso crisis,Mexico depended on foreign portfolio capital to finance its economic development.This foreign capital influx

Accepted Answer

A) caused higher domestic inflation. 
B) led to an overvalued peso. 
C) helped Mexico's trade balances. 
D) a) and b) are correct 
A) caused higher domestic inflation. 
B) led to an overvalued peso. 
C) helped Mexico's trade balances. 
D) a) and b) are correct

Question 7

The United States adopted the gold standard in

Accepted Answer

A) 1776. 
B) 1879. 
C) 1864. 
D) 1973. 
A) 1776. 
B) 1879. 
C) 1864. 
D) 1973.

Question 8

The gold standard still has ardent supporters who believe that it provides

Accepted Answer

A) an effective hedge against price inflation. 
B) fixed exchange rates between all currencies. 
C) monetary policy autonomy. 
D) all of the above 
A) an effective hedge against price inflation. 
B) fixed exchange rates between all currencies. 
C) monetary policy autonomy. 
D) all of the above

Question 9

Under a gold standard,if Britain exported more to France than France exported to Great Britain,

Accepted Answer

A) such international imbalances of payment will be corrected automatically. 
B) this type of imbalance will not be able to persist indefinitely. 
C) net export from Britain will be accompanied by a net flow of gold in the opposite direction. 
D) all of the above 
A) such international imbalances of payment will be corrected automatically. 
B) this type of imbalance will not be able to persist indefinitely. 
C) net export from Britain will be accompanied by a net flow of gold in the opposite direction. 
D) all of the above

Question 10

The choice between the alternative exchange rate regimes (fixed or floating)is likely to involve a trade-off between

Accepted Answer

A) national monetary policy autonomy and international economic integration. 
B) exchange rate uncertainty and national policy autonomy. 
C) Balance of Payments autonomy and inflation. 
D) unemployment and inflation. 
A) national monetary policy autonomy and international economic integration. 
B) exchange rate uncertainty and national policy autonomy. 
C) Balance of Payments autonomy and inflation. 
D) unemployment and inflation.

Question 11

During the period of the classical gold standard (1875-1914)there were

Accepted Answer

A) highly volatile exchange rates. 
B) volatile exchange rates. 
C) moderately volatile exchange rates. 
D) stable exchange rates. 
E) no exchange rates. 
A) highly volatile exchange rates. 
B) volatile exchange rates. 
C) moderately volatile exchange rates. 
D) stable exchange rates. 
E) no exchange rates.

Question 12

Advantages of a flexible exchange rate include which of the following?

Accepted Answer

A) National policy autonomy 
B) Easier external adjustments 
C) The government can use monetary and fiscal policies to pursue whatever economic goals it chooses. 
D) All of the above 
A) National policy autonomy 
B) Easier external adjustments 
C) The government can use monetary and fiscal policies to pursue whatever economic goals it chooses. 
D) All of the above

Question 13

With regard to the current exchange rate arrangement between the U.S.and the U.K.,it is best characterized as

Accepted Answer

A) independent floating (market determined). 
B) managed float. 
C) currency board. 
D) pegged exchange rate within a horizontal band. 
A) independent floating (market determined). 
B) managed float. 
C) currency board. 
D) pegged exchange rate within a horizontal band.

Question 14

According to the theory of optimum currency areas,

Accepted Answer

A) the relevant criterion for identifying and designing a common currency zone is the degree of factor (i.e.capital and labor) mobility within the zone. 
B) exchange rates should reflect the degree to which workers are willing to move to get a better job. 
C) exchange rates are determined by portfolio managers seeking the highest return. 
D) none of the above. 
A) the relevant criterion for identifying and designing a common currency zone is the degree of factor (i.e.capital and labor) mobility within the zone. 
B) exchange rates should reflect the degree to which workers are willing to move to get a better job. 
C) exchange rates are determined by portfolio managers seeking the highest return. 
D) none of the above.

Question 15

Since the end of the fixed exchange rate system of the Smithsonian agreement

Accepted Answer

A) exchange rates were revalued in the Bretton Woods agreement. 
B) exchange rates have been allowed to float. 
C) the United States returned to a gold standard. 
D) the zone of monetary stability has been limited to the U.S., Canada, and Mexico. 
A) exchange rates were revalued in the Bretton Woods agreement. 
B) exchange rates have been allowed to float. 
C) the United States returned to a gold standard. 
D) the zone of monetary stability has been limited to the U.S., Canada, and Mexico.

Question 16

With regard to the current exchange rate arrangement between Italy and Germany,it is best characterized as

Accepted Answer

A) independent floating (market determined). 
B) managed float. 
C) an exchange arrangement with no separate legal tender. 
D) pegged exchange rate within a horizontal band. 
A) independent floating (market determined). 
B) managed float. 
C) an exchange arrangement with no separate legal tender. 
D) pegged exchange rate within a horizontal band.

Question 17

In the United States,bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873,

Accepted Answer

A) when Congress dropped the silver dollar from the list of coins to be minted. 
B) when Congress dropped the twenty-dollar gold piece from the list of coins to be minted. 
C) when gold from the California gold rush drove silver out of circulation. 
D) when gold from the California gold rush drove gold out of circulation. 
A) when Congress dropped the silver dollar from the list of coins to be minted. 
B) when Congress dropped the twenty-dollar gold piece from the list of coins to be minted. 
C) when gold from the California gold rush drove silver out of circulation. 
D) when gold from the California gold rush drove gold out of circulation.

Question 18

Since the SDR is a "portfolio" of currencies

Accepted Answer

A) its value tends to be more stable than the value of any of the individual currencies included in the SDR. 
B) its value tends to be less stable than the value of any of the individual currencies included in the SDR. 
C) its value tends to be as stable as the average of the individual currencies included in the SDR. 
D) none of the above 
A) its value tends to be more stable than the value of any of the individual currencies included in the SDR. 
B) its value tends to be less stable than the value of any of the individual currencies included in the SDR. 
C) its value tends to be as stable as the average of the individual currencies included in the SDR. 
D) none of the above

Question 19

Generally speaking,a country would be more prone to asymmetric shocks

Accepted Answer

A) the more diversified and less trade-dependent its economy is. 
B) the less diversified and more trade-dependent its economy is. 
C) the less diversified and less trade-dependent its economy is. 
D) the more diversified and more trade-dependent its economy is. 
A) the more diversified and less trade-dependent its economy is. 
B) the less diversified and more trade-dependent its economy is. 
C) the less diversified and less trade-dependent its economy is. 
D) the more diversified and more trade-dependent its economy is.

Question 20

The core of the Bretton Woods system was the

Accepted Answer

A) World Bank. 
B) IMF. 
C) United Nations. 
D) Interstate Commerce Commission. 
A) World Bank. 
B) IMF. 
C) United Nations. 
D) Interstate Commerce Commission.

Under the Bretton Woods system

Once the changeover to the euro was completed by July 1,2002,the legal-tender status of national currencies in the euro zone

Assume that a country is on the gold standard.In order to support unrestricted convertibility into gold,banknotes need to be backed by a gold reserve of some minimum stated ratio.In addition,

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Prior to the peso crisis,Mexico depended on foreign portfolio capital to finance its economic development.This foreign capital influx

The United States adopted the gold standard in

The gold standard still has ardent supporters who believe that it provides

Under a gold standard,if Britain exported more to France than France exported to Great Britain,

The choice between the alternative exchange rate regimes (fixed or floating)is likely to involve a trade-off between

During the period of the classical gold standard (1875-1914)there were

Advantages of a flexible exchange rate include which of the following?

With regard to the current exchange rate arrangement between the U.S.and the U.K.,it is best characterized as

According to the theory of optimum currency areas,

Since the end of the fixed exchange rate system of the Smithsonian agreement

With regard to the current exchange rate arrangement between Italy and Germany,it is best characterized as

In the United States,bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873,

Since the SDR is a "portfolio" of currencies

Generally speaking,a country would be more prone to asymmetric shocks

The core of the Bretton Woods system was the

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 2: International Monetary System

Under the Bretton Woods system

Once the changeover to the euro was completed by July 1,2002,the legal-tender status of national currencies in the euro zone

Assume that a country is on the gold standard.In order to support unrestricted convertibility into gold,banknotes need to be backed by a gold reserve of some minimum stated ratio.In addition,

Consider the supply-demand framework for the British pound relative to the U.S.dollar shown in the nearby chart.The exchange rate is currently $1.80 = £1.00.Which of the following is correct?

Prior to the peso crisis,Mexico depended on foreign portfolio capital to finance its economic development.This foreign capital influx

The United States adopted the gold standard in

The gold standard still has ardent supporters who believe that it provides

Under a gold standard,if Britain exported more to France than France exported to Great Britain,

The choice between the alternative exchange rate regimes (fixed or floating)is likely to involve a trade-off between

During the period of the classical gold standard (1875-1914)there were

Advantages of a flexible exchange rate include which of the following?

With regard to the current exchange rate arrangement between the U.S.and the U.K.,it is best characterized as

According to the theory of optimum currency areas,

Since the end of the fixed exchange rate system of the Smithsonian agreement

With regard to the current exchange rate arrangement between Italy and Germany,it is best characterized as

In the United States,bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873,

Since the SDR is a "portfolio" of currencies

Generally speaking,a country would be more prone to asymmetric shocks

The core of the Bretton Woods system was the

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters